#2 Unique challenges and opportunities in China's market intelligence industry - Part 1
Every challenge is an opportunity
This newsletter has a strong start. After the first article, we now have 130 subscribers, many of whom are industry heavyweights from all around the world.
At the end of the article last week, I said there are many unique challenges and opportunities in China, which will be my main topic for this letter.
Note that I mention “challenges and opportunities” in one breath, and I mean it both literally and figuratively. Each challenge is an opportunity to tackle because each challenge represents a body of value that’s hitherto untapped. And I can think of at least four such “challenge-opportunities” pairs.
Challenge-opportunity #1: A highly digitalized society, but data are under-monetized
China’s real market economy was really kickstarted in the 1990s and grew simultaneously with the Internet and digital technologies. Many industries were built with digitalization from the very beginning. This created a unique situation where China could be more advanced than advanced economies in terms of digitalization.
For instance, when I lived in Hong Kong, an advanced economy, I still regularly used cash to make payments. When trading stocks, the physical stock certificate was still a thing. Once, I carried with me an unnamed stock certificate worth north of $100 million in my bag for my then-boss to move from one stock broker to another. (What a thrill to feel richer than a drug dealer!)
Yet, by that time, mobile payment was already widely adopted in the Mainland, and only extremely few people knew that stocks actually used to exist in physical forms.
This phenomenon is prevalent in every industry, be it marketing, transportation, retail, catering, logistics, automobiles, factory equipment, or cross-border trade.
Data is everywhere.
This early proliferation of digitalization and big data supposedly should provide ample resources for the market intelligence and DaaS industry, and theoretically, we should have had a much bigger opportunity than in the West.
In the West, this industry is highly advanced, and each data vertical has already been well monetized. For instance, there are always several players for each type of data, such as satellite data (SpaceKnow, Orbital Insights…) and credit card data (YipitData, MScience, Second Measure, Earnest Research…). On the other hand, society-wide digitalization in the West is actually not as advanced as in China, limiting further growth (I have heard some people still write checks in the US?)
China’s situation is exactly the opposite. On the one hand, there is much more data to work with, yet on the other hand, most of it remains untapped.
So why is it untapped? A major hurdle is that all of these data are kept in hundreds of thousands (even millions) of data silos of large and small sizes, and those silos aren’t talking to each other.
In fact, when China established National Data Administration in 2023, its main mission was to break down the walls of those silos and let data really flow. Personally, I am not so hopeful for such state-led efforts, but I will write about this in the future.
The unique opportunity, though, is precisely that for those who can manage to open these silos, they can be a “super-connector” for the underlying data to flow out.
One of the first such partnerships we at BigOne Lab set up (which I always used as an example to share with my clients and investors) was how we built our high-frequency data monitor for China’s beer industry.
The biggest channel for beer consumption is through restaurants, bars, and karaoke outlets. In the highly digitalized society of China, when consumers go to a restaurant or bar, it is very likely we won’t have human waiters or waitresses anymore to take orders. Instead, we will scan a QR code installed on the table and make orders through e-menus.
Most of these “QR-codes-on-tables” are operated by some third-party software providers, which theoretically have data about each item on each order for each consumer and each restaurant outlet. So we knocked on the doors of a few of these software providers and made an offer: Please sell us your data. Feel free to anonymize it and de-sensitize it so no information about any specific individual or merchant shall be revealed to us, but we are only interested in the product item-level details.
For instance, Mr. ABC bought 2 bottles of Budweiser Magnum at the XYZ restaurant for a grand total of ￥35.5 at 8:20 pm on November 11, 2024. This event will be captured and stored in our database (without knowing who Mr. ABC or restaurant XYZ actually is, of course.)
From that data, we clean (and there is a lot of super dirty data to clean) and turn them into a solid product through which investors and corporate decision-makers alike can have real-time monitoring of how consumers are actually consuming their and their competitors’ products.
By partnering with us, the QR-code-on-table providers gain an extra profit for their low-margin software business, which they could not gain if we hadn’t existed. In the meantime, our customers gain valuable intelligence about something they didn’t previously know about. Thus, a small pocket of incremental value was achieved.
Just imagine, there are hundreds of thousands of these untapped value pockets waiting for us to unlock in logistics, transportation, sportswear, luxury, advanced manufacturing, new energy, tourism, video games, export and import, and basically every corner of our economy.
In time, our industry will witness the rise of “data super-connectors,” whose databases are plugged into all of the previous “silos,” and the data will flow through these super-connectors to the people who need to gain intelligence from those data.
And it’s likely that when this happens, our market will not be as fragmented as it is in the West.
For the next issue, I will discuss 3 other pairs of “challenge-opportunities”:
The impregnable “data walled gardens” of the “big boys”
Lack of trust
The same starting line for different generations of technologies and solutions
Stay tuned!